The COVID-19 pandemic has thrown many businesses off their anticipated tracks. Despite an environment of uncertainty and political-economic tensions, global VC investment rose for the second straight quarter – reaching $73.2B (approx €62B) in Q3’20, according to the Q3’20 edition of Venture Pulse – a quarterly report published by KPMG Private Enterprise on global VC trends.
VC investment in Europe reached new record
VC investment in Europe reached a new record high of $12.1B (approx €10.2B) across 1,024 deals in Q3’20, led by a $650M (approx €550M) raise by Sweden-based Klarna, a $633M (approx €535M) raise by Germany-based CureVac, a $600M (approx €508M) raise by Northvolt in Sweden, and a $580M (approx €537M) raise by Revolut in the UK.
The Nordic region (€1.8B), Germany (€1.7B), and Israel (€1.3B) all saw record levels of VC investment this quarter. Despite a quarter-over-quarter decline from $3.8B (approx €3.2B) in Q2’20 to $3B (approx €2.5B) in Q3’20, the UK continued to account for the largest share of VC investment in Europe.
Investment up in Q3
As per the report, Americas attracted $40B (approx €34B) in investment, with the US accounting for the vast majority ($37.8B). VC investment in the Asia-Pacific region continued to rebound, with the region attracting $21.1B (approx €18B) in Q3’20 – up from $17.2B (approx €14.5B) in Q2’20.
Exit activity surged to almost €221B
VC-backed exit activity in 2020 has surged to almost $250B (approx €221B), with Q3’20 alone driving $155.7B (approx €132B) close to the previous record set during Q2’19 (€144B), driven by successful IPOs, including Snowflake, JFrog, and Unity Software.
“After several quiet quarters, the IPO market for VC-backed companies rocketed into high gear in Q3’20, with a number of high-profile unicorns making successful exits,” says Conor Moore, Co-Leader, KPMG Private Enterprise Emerging Giants Network KPMG International . “Given the recent filings by several other unicorns, coupled with the explosion of SPAC transactions, Q4’20 looks on-track to continue the record-setting pace.”
Expected to remain steady in Q4
VC investment in pharma and biotech remained very hot in Q3’20, led by a $600M (approx €508B) raise by Germany-based CureVac; at the end of the quarter, total year-to-date investment in the sector was $31 billion – already well above the total of $27.1B (approx €23B)seen during all of 2019.
VC investment is expected to remain quite steady heading into Q4’20. Late stage deals are expected to remain a top priority for VC investors, which will likely continue to make it difficult for early stage companies to attract investment. On a sector basis, fintech, business productivity, edtech, healthtech and biotech are all expected to remain very attractive.
“While overall VC investment has remained surprisingly resilient given the number of diverse challenges being faced around the globe, the extended decline in funding for early stage companies causes some concern,” says Kevin Smith, Co-Leader, KPMG Private Enterprise Emerging Giants Network, KPMG International.
“With many seed and early stage companies finding it difficult to attract funding, there could be a serious longer-term impact on the VC pipeline, slowing advances and innovation into new ideas and areas of the economy,” he adds.
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